Credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that Indian oil & gas (O&G) companies’ net zero and sustainability targets are aggressive as against those of international O&G players, given the lower proportion of capex presently allocated to the transition and it being limited to addressing process emissions, Consequently, progress against interim milestones and availability of funding (equity and debt) will be key in assessing its success.
According to the report, in the next five years, lower margins due to higher R&D spend and incremental capex to transition to green sources could result in lower free cash flows, necessitating an increase in leverage. However, the agency expects credit profiles likely to remain resilient, given the cushion in the existing ratings and government support in case of public sector O&G companies.
On the long term (beyond five years) basis, India Ratings and Research stated that the potential risk of a further push on R&D and capex spending, higher cost of borrowings and lower funding availability will necessitate pro-active management of the transition journey.
